BNP Paribas
Pierre Brun and Martin Caupin
03 May 2018
Pierre Brun, head of digital transformation, and Martin Caupin, head of innovation, analytics lab, at BNP Paribas explain how the evolution of technology allows for increased efficiency
Image: Shutterstock
How would you describe the importance of technology within securities finance?
Pierre Brun: Technology is one of the key enablers we use to improve customer and employee experience, industrialise our processes and build the services of tomorrow. BNP Paribas is leveraging our internal technological expertise along with several industry service providers to increase the scalability of our lending programmes, and provide both our clients and the market with increased levels of efficiency.
BNP Paribas has made it a priority to utilise technology across our lending platform. Technology and data applications have assisted in removing many monotonous and often low margin transactions for the front office, resulting in increased returns for clients. Our middle and back offices have also benefited from advances in technology primarily in the reconciliation and trade settlement areas. Our ability to implement processes levering technology provides our clients with better execution, higher margins and greater transparency.
Is new technology just about becoming more efficient or does it open new opportunities?
Martin Caupin: Technology provides both. Its evolution allows for more efficiency when we embed new technologies in existing processes. On this front, optical character recognition combined with deep learning networks can process documents, where there used to be operators processing information manually.
At the same time, some transformative technologies, such as blockchain or artificial intelligence (AI) will allow us to explore new opportunities, with which we aim at differentiating ourselves for the benefit of our clients.
As an example, BNP Paribas Securities Services partners with Fortia Financial Solutions, a software company which uses AI, machine learning and business process monitoring to help fund clients meet their rising compliance and data management requirements. It brings internal efficiency as the machine scrubs documents (for instance prospectuses) and provides tools to monitor the content instead of a human going through the file manually.
It is also an opportunity for BNP Paribas as we engage and partner with financial technology and regulation technology firms to enhance our customer experiences by providing additional services. Synergies were quickly spotted, and the bank acquired an equity stake in Fortia Financial Solutions.
Three areas of focus for you right now are artificial intelligence, smart data and blockchain, what can you share with us about these areas?
Brun: Our smart data programme is the key milestone in our digital transformation success. It will help us make the most of the data we hold to implement intelligent services for our clients but also to enhance internal operations.
On AI, we foresee natural language processing capabilities as a key enabler for additional efficiencies in the banking industry. Given that banks deal with large sets of unstructured data, from client communications to contracts or news, our ability to extract and structure this information could generate significant improvements in our processes, as well as new insights to create business ideas.
BNP Paribas utilises natural language processing applications in various ways to increase the efficiency of lending. The team has developed a front-office trading layer to confirm broker locates and execute in real time. The ability of the technology to cross-reference the email locates against the existing static data requirements like credit limits, drastically increases the efficiency of lending. The automation of such developments have enhanced the client experience, increased profitability, and have provided greater capacity for the front office to engage in higher margin transactions. The team will continue to enhance the front office trading layer over the next several quarters all with the notion of leveraging the current functionality.
Caupin: Regarding blockchain, several projects already run across the bank as we try to harness the technology. Its core characteristic—safe record management in a distributed ledger—makes it attractive for different companies to work together in a trusted environment. BNP Paribas took an early first mover approach towards blockchain, as we thought of potential applications in banking. In December 2016, we completed our first instant, cross-border blockchain payment as part of our ‘cash without borders concept. The cash movements settled in just a few minutes across three European countries. We deployed a private blockchain in our own treasury group and integrated it with our legacy technology. We found meaningful operational efficiencies such as a better ability to manage cash across different international businesses.
How will these deliver client benefit?
Caupin: As we extend our service offering with technology, our clients will directly benefit from it. Blockchain records and transfers data in a transparent safe and auditable environment, which is ultimately what our clients are seeking for. As we embrace the technology, our clients will ultimately benefit from it as we increase our efficiency. We believe blockchain will be widely adopted, so we are thinking about what services will make us unique. As more and more participants use this technology, players will move toward standardisation of protocols for exchanging information, and we foresee this standardisation to play a great role in efficiency, transparency and accessibility of data, both internally and externally when working within the network or with regulators. Thanks to our smart data programme we expect to provide insights to our clients based on the information, we process for them or elsewhere on the market.
Brun: Our clients also expect an improved experience. Tech companies were the first to understand that trend and invested a lot in user experience to increase their usage. This trend is spreading to all services, from customers to businesses. Aside from market coverage and capabilities, this user experience, across the platform, will be a differentiator in the market. Securities services detected that trend early and had a dedicated team focusing on client digital experience. Their role is to work with clients (in co-creation mode) to enhance and provide new services through our portal. As an example, Neolink, BNP Paribas Securities Services’ client main portal is now becoming a instant trade monitoring tool delivering customisable data.
How has the involvement of Tata Consultancy Group and the partnership has helped?
Brun: TCS is a long-time partner of BNP Paribas Securities Services. We decided to step up this partnership last year by co-creating on a blockchain project to enhance corporate actions processing, one of the most complex areas in the asset servicing value chain. Indeed, the presence of many intermediaries in the dissemination of corporate actions results in delayed information, tampering, task duplication and heterogeneous message structure at an international level. Our objective is to eliminate these difficulties by using blockchain to integrate information seamlessly across our portals.
Data acquired from official sources on over 90 markets will be stored resiliently in a distributed infrastructure and disseminated instantaneously through new channels, application programming interface or Node. This initiative is a perfect example of our willingness to move forward and to build momentum over time.
BNP Paribas estimates that 70 percent of its market volume is now conducted on electronic marketplaces, how far will this trend go and why?
Caupin: Indeed, the securities market has moved quickly to an electronic marketplace with minimum human intervention. The trend is upward, as we try to include more products in our electronic platform. This allows for standardisation and lowered margin as well as quicker execution for our clients. We don’t expect it to reach as high as 90 percent, as there will be trades requiring human intelligence to sort through. The limit will be defined by our clients in need of bespoke services.
As the securities finance market becomes more complex and as our client base becomes more sophisticated, manual intervention will continue to play an essential role in maximising client revenues.
The lending of ‘specials’ or hard-to-borrow securities, special situation or corporate action events like SCRIPS/Dividend Reinvestment Plans (DRIPS) and transactions linked to collateral transformation will still involve manual intervention. Further, offering clients bespoke and customised lending programmes will also command increased levels of manual involvement. Certainly, technology will assist in the execution and trade maintenance of these transactions, but the expertise of market professionals will still be required.
How do you see the human intervention in the market changing?
Brun: Thanks to AI and robotic process automation, our employees will have more time to dedicate to value-added tasks and work requiring expertise and creativity. As well as automating time–consuming and repetitive tasks, we are also looking at how AI can help us generate client reports automatically with recommendations for actions to take. Armed with this information, our sales team can then focus on value-added tasks such as relationship building.
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